Correlation Between Ford and Teledyne Technologies

Can any of the company-specific risk be diversified away by investing in both Ford and Teledyne Technologies at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Ford and Teledyne Technologies into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Ford Motor and Teledyne Technologies Incorporated, you can compare the effects of market volatilities on Ford and Teledyne Technologies and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Ford with a short position of Teledyne Technologies. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and Teledyne Technologies.

Diversification Opportunities for Ford and Teledyne Technologies

-0.07

Correlation Coefficient

Ford  Teledyne Technologies

Good diversification

The 3 months correlation between Ford and Teledyne is -0.07. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Teledyne Technologies Incorpor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Teledyne Technologies and Ford is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Ford Motor are associated (or correlated) with Teledyne Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Teledyne Technologies has no effect on the direction of Ford i.e., Ford and Teledyne Technologies go up and down completely randomly.

Pair Corralation between Ford and Teledyne Technologies

Taking into account the 90-day investment horizon Ford Motor is expected to under-perform the Teledyne Technologies. In addition to that, Ford is 1.59 times more volatile than Teledyne Technologies Incorporated. It trades about -0.15 of its total potential returns per unit of risk. Teledyne Technologies Incorporated is currently generating about -0.07 per unit of volatility. If you would invest  45,450  in Teledyne Technologies Incorporated on October 9, 2024 and sell it today you would lose (1,190) from holding Teledyne Technologies Incorporated or give up 2.62% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	92.5%
Values	Daily Returns

Ford Motor  vs.  Teledyne Technologies Incorpor

Ford Motor

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ford Motor has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable technical and fundamental indicators, Ford is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Teledyne Technologies

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Teledyne Technologies Incorporated are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Teledyne Technologies may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Ford and Teledyne Technologies

The main advantage of trading using opposite Ford and Teledyne Technologies positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, Teledyne Technologies can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Teledyne Technologies will offset losses from the drop in Teledyne Technologies' long position.

The idea behind Ford Motor and Teledyne Technologies Incorporated pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.